"Government Response to the Netherlands and the Global
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Letter of 10 July 2020 from the Minister for Foreign Trade and Development Cooperation to the House of Representatives setting out the government’s response to AIV Advisory Letter 34: The Netherlands and the Global Approach to COVID-19. COVID-19 is causing a global crisis of unprecedented proportions. In the Netherlands, the government has attempted to limit and cushion the impact on society with an extensive package of support measures. The EU is also developing a suitable set of European support and stimulus measures. Partly in response to a request from the House of 16 April, the government requested the Advisory Council on International Affairs (AIV) to provide urgent advice concerning an appropriate and effective Dutch contribution to global efforts to mitigate the impact of coronavirus, particularly as regards its effects on the most vulnerable countries. The government appreciates the speed, clarity and specific nature of the AIV’s advisory letter, which was issued on 11 May. Below, the government explains the position it has adopted, based partly on the advice of the AIV, in responding to the request of the Parliamentary Committee on Foreign Trade and Development Cooperation (2020Z08325/2020D17868). The government also responds in the present letter to the motions submitted by MP Kirsten van den Hul et al. (Parliamentary Paper 33 625, no. 298), MP Kirsten van den Hul et al. (Parliamentary Paper 33 625, no. 299), MP Chris Stoffer (Parliamentary Paper 33 625, no. 308), MP Anne Kuik et al. (Parliamentary Paper 33 625, no. 310), MP Joël Voordewind et al. (Parliamentary Paper 33 625, no. 311), MP Mahir Alkaya (Parliamentary Paper 33 625, no. 313) and MP Chris Stoffer (Parliamentary Paper 33 625, no. 314). Impact of COVID-19 on vulnerable countries The AIV notes that there is much about the scale and duration of the coronavirus crisis that remains uncertain, but warns of a looming humanitarian and economic disaster, thus confirming reports by the UN, IMF, World Bank and other organisations. The rapid spread of the virus across the globe has had an extraordinary impact, above all on public health. Although the number of infections in Africa is still relatively low – the UN expects a peak to occur in July/August – many countries are already experiencing the considerable secondary effects of the crisis. This is not only a public health crisis. The lockdowns and the disruption of global trade, value chains and transport have hampered access to food, vaccines and medicines everywhere. This has hit vulnerable countries and vulnerable groups of people particularly hard, and a key impact of the pandemic has been a socioeconomic crisis with immediate implications for food security. The World Food Programme (WFP) has been warning since April that the crisis will cause the number of people experiencing acute hunger to double in 2020 from 135 million to 265 million. The global economic impact of the crisis is enormous. The UN and IMF estimate that low- and middle-income countries will need USD 2.5 trillion in support to compensate for capital flight and 1 loss of income, which are happening on a vast scale.0F Capital flight is considerably greater and more volatile now than during the financial and economic crisis of 2008. The decline in tourism and loss of remittances, and the fall in raw material prices, are causing a large drop in income for many developing countries. Debt levels in developing countries were already alarming before the COVID-19 crisis. Around half of all low-income countries are struggling with unsustainable debt, or are at great risk of finding themselves in such circumstances. The situation is deteriorating rapidly as a result of the COVID- 19 crisis. Furthermore, the debt burden of low-income countries is no longer the only problem, as dozens of middle-income countries now also find themselves in extremely precarious debt positions. The acute financial problems being experienced by countries, companies and households are undermining the response to the crisis and threatening the livelihoods of hundreds of millions of people. The OECD predicts that 50% of SMEs worldwide are threatened with bankruptcy. The ILO has warned that 1.6 billion people working in the informal sector are at risk of being unable to support themselves. The WTO expects to see a historic contraction of global trade in 2020, of between 13 and 27%. Decades of growth and socioeconomic progress in developing countries are 1 UNCTAD (30 March 2020), ‘UN calls for $2.5 trillion coronavirus crisis package for developing countries’; IMF (27 March 2020), Transcript of Press Briefing by Kristalina Georgieva following a Conference Call of the International Monetary and Financial Committee. 1 at risk of being wiped out, and the Sustainable Development Goals are moving further beyond our reach. The COVID-19 crisis is also having an impact on existing social issues, including human rights. People already in a vulnerable position – including journalists, LGBTI people, women and girls – have found their situation has worsened in recent months. This underlines the fact that governments around the world must continue their efforts to protect human rights. Implications for the Netherlands and the EU The global COVID-19 crisis has a range of immediate and potential implications for the Netherlands and the European Union. The Netherlands will remain vulnerable to coronavirus for as long as no vaccine is available and the virus remains in circulation on the planet. Many people and goods travel from, through and to the Netherlands, so there will always be a risk of the virus re- entering from outside the Netherlands and the rest of Europe. We are therefore dependent on the ability of the most vulnerable countries to defeat the virus. The same applies to the recovery of the Dutch and European economies, which are inextricably linked to the wider global economy. The worldwide economic recession poses a threat to the global financial and economic system, and thus also to the Dutch economy. The approximately 27,000 Dutch companies active outside the EU will be hit hard, particularly in vulnerable emerging markets, as their local partners (often SMEs) have smaller buffers and cannot necessarily rely on government support. They are also exposed to currency risks. Many of the flowers traded in Aalsmeer, for example, come from Kenya and Ethiopia. The Confederation of Netherlands Industry and Employers (VNO-NCW) and SME representative Royal Association MKB-Nederland have urged, in their Africa Strategy and COVID-19 Action Agenda, that these markets not be overlooked, and have called for rapid action to prevent damage to economic sectors there. The COVID-19 crisis has all the ingredients of a looming security crisis, with a potential impact on national security too. The sharp economic decline in low- and middle-income countries could directly impact on Europe and the Netherlands as a result of growing instability on the EU’s external borders. Many countries in the immediate vicinity of the Kingdom of the Netherlands and of the European Union are facing tremendous financial challenges as the COVID-19 crisis robs them of income. It is precisely those countries with a fragile form of democracy and governance that could face increasing pressure as a result. It has already been observed that ongoing political and security crises in the Sahel region are worsening due to COVID-19’s impact on the economy, healthcare and food security. The European Asylum Support Office (EASO) and UN agencies (IOM, UNHCR) have warned that the crisis in neighbouring regions will potentially increase the pressure on Europe caused by irregular migration. The AIV draws a parallel with the Arab uprisings of 2011, which grew out of a lack of prospects, high food prices and poverty resulting from the financial and economic crisis of 2008. The instability in the Arab region was the root cause of the migration crisis in 2015. The COVID-19 crisis also poses a risk to reception of refugees in the region of origin. Countries that take in a lot of refugees (such as Lebanon) are often highly vulnerable themselves, and the crisis could give rise to tensions between host communities and refugees. The AIV rightly notes there is much at stake in geopolitical terms. The COVID-19 crisis has exacerbated existing divisions and is exposing uncomfortable strategic dependencies. The government is also concerned at the fact that systemic rivalry is now being imported into multilateral organisations. The tensions within the World Health Organization (WHO) (concerning the origin and spread of coronavirus, and participation by Taiwan) are just one example. This has had an impact on the global response to the crisis. The G7 and G20 could also have taken a more leading role, as they did during the 2008 financial crisis. An effective approach to the pandemic and the associated global economic and other consequences requires a close international community, strong multilateral organisations and global leadership. The proximity of the Middle East and Africa means that it is more important than ever for the EU to make maximum use of its diplomatic, trade and development instruments. The government agrees with the AIV that it is vital for the EU that the multilateral order in the UN – including WHO – be protected. The Netherlands has a direct interest in this, given its open economy and society. 2 Government’s response to the AIV recommendations The government shares the AIV’s conviction that a suitable response by the international community is needed to support the most vulnerable countries, particularly in Africa. The government’s reasons are based on a sense of common humanity, enlightened self-interest, and the need to consolidate relationships of trust with partner countries and neighbouring regions, and to strengthen the geopolitical position of the EU.